Surge in New Construction Projects Signals Strengthening of Southern Housing Market
Recent Census Bureau and NAR data shows that January 2024 had an increase of 3.6% in year-over-year increase of new construction homes sold. This is on top November's seasonally adjusted number of new homes 1.56 million, surpassing economists' predictions of 1.36 million. This figure represents a 15% increase from October's revised figure of 1.36 million and a 9% rise from December last year. In the single-family homes sector, there was an 18% jump from the previous month, marking the highest level since May.
Jeffrey Roach, Chief Economist at LPL Financial, notes that the recent surge in housing starts reflects builders' efforts to meet the ongoing demand for new homes despite the minimal impact of high borrowing costs on construction activities.
By comparison, existing home sales fell 19% year over year in January of 2024 as homeowners were reluctant to give up their own low interest rates and decrease the price of their homes to make monthly payments more affordable for potential buyers.
Roach points out that there is substantial activity in single-family and multi-family housing sectors, with builders taking advantage of the limited supply of existing homes on the market. The bulk of new construction is occurring in the South, fueled by the growing trend of hybrid work and the pursuit of more affordable living options.
The latest data is a positive indicator for the housing market, which has been struggling with high mortgage rates and affordability issues. Reports suggest an improvement in home builder sentiment in December, ending a four-month decline. The Mortgage Bankers Association forecasts a 6% increase in existing home sales and a 10% jump in new home sales over the next year.
Federal Reserve Chair Jerome Powell indicated that the central bank might have concluded its interest rate hikes, offering a more optimistic future outlook. The Fed's anti-inflation measures had driven mortgage rates to nearly 8% last autumn, the highest in over two decades.
What this means for you
The recent rise in new home construction, especially single-family homes, is important for you, especially if you want to buy a new home. Here's what this means in more detail:
- Increased Housing Options. With builders ramping up construction, the number of new homes available on the market is set to rise. This is notably true for single-family homes, which saw the most significant increase in construction. If you're looking for a new home, this means a broader selection of properties to choose from. You'll have more opportunities to find a home that matches your specific needs, whether it's in terms of size, design, location, or amenities.
- Regional Variations. The surge in construction is quite pronounced in the South. If you're considering this region, you might find a larger inventory of new homes. This could be a winning option if you're seeking more affordable living costs or if Southern living appeals to you.
- Potential for Competitive Pricing. Increasing the supply of new homes could lead to more competitive pricing in the housing market. Your budget may stretch further, allowing you to consider homes that were previously out of your price range.
- Quality and Features of New Construction. New construction homes often have modern amenities, energy-efficient designs, and the latest building standards. These new homes are more appealing than older ones, requiring renovations or updates.
- Timing Considerations. While the increase in construction is promising, it's important to consider when these homes will be available. New construction can take time, so if you're looking to move quickly, you need to balance your timing needs with the availability of these new homes.
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